Four Steps for Better Real Estate Investing

byChrisonDecember 9, 2009

This is the time of year when people should be gearing up to start buying properties, and it’s also full of New Year’s resolutions. The whole month of December is like that for me, because I’m preparing to return to Canada. This means it’s time for me to get my house in order and to put the planning I’ve done during my 3 months away into action.

There’s also a lot of people who just finished REIN’s ACRES program, or who are thinking of working on their retirement plan or just interested in getting into this real estate investing thing. It seems like a good time for me to explain the basics of what I do and why it’s worked so well for so many people. It’s also a good refresher for investors who sometimes get distracted by bright shiny objects.

1. Choose a model that works for you and learn it inside and out
I use the ACRES system, as taught by Don Campbell and the Real Estate Investment Network, together with some thing I’ve learned from over a decade of experience in the property management industry. I’ve attended several of the ACRES weekend workshops, am an active REIN member and I read/participate with a number of online and in person meetings and networking events.

Find a community of successful, generous and like-minded investors. If you’re in Canada, there’s no doubt that REIN is the right place to be. Almost three billion dollars in real estate doesn’t lie. If you’re interested, I can bring people to the Alberta REIN meetings as a guest.

Whatever system or group you find, make a reasonable commitment. It shouldn’t be $40,000, but good education costs money. For REIN it’s a year and a half commitment, and I’m paying about $100/month. There’s more expensive groups and less expensive ones, but it’s important to look at the ROI. I made my membership fees back in the first six months of positive cash-flow from one property.

Don’t become the serial seminar grad. If you’re going to a different one every weekend, but never actually buying real estate, you need a 10-step program, not a real estate program.

2. Determine the best geographic location for your business
Not all models work the same in each area. In particular, watch out for US models running in Canada.

There’s a phrase you need to learn: Economic Fundamentals. The things are going to power your real estate investment are simple things: people, jobs, infrastructure, political climate. They’re real numbers, you can measure them, track them and consider them dispassionately. They often bear no resemblance to what you’ll see in newspaper headlines or what the locals think.

What you need to do is examine the important fundamentals across several regions (or countries for that matter, because this is why you DO NOT want to invest in the US right now). Look for places which are doing better than the average in terms of things like:
– In-migration
– Job Growth
– Average Wages
– Growing Infrastructure
– Favorable Political Climate
– Tax Environment

There’s really no reason to buy in the area you live in. You can outsource property management or do it by distance. The decision of where to invest should be driven by economic fundamentals, not by the emotional response reaction of ‘if I can’t see it, I can’t manage it’.

When I bought my first property in Edmonton, I was living in Kelowna, had a Realtor in Edmonton, a Lawyer in Leduc, a Mortgage Broker in Vancouver and another Lawyer in Kelowna. It’s nothing a phone call or a FedEx can’t fix.

If you’re thinking of Alberta, I’d highly recommend REIN’s Top Investment Towns report, which has a lot of the economic analysis done for you.

3. Find, Buy, Wait
This seems pretty simple, but if you’re like me, and already think you have things figured out, but it’s easy to forget it. This is also the most important step to get things kicked off again.

Go find a good property that fits your system and write an offer*. If nothing else, this will kick the ladder out from under you and and make sure you’re actively working to grow your business.

That’s the find and buy part. Next comes the best part of good real estate.

Wait.

Good real estate is boring, requiring only time and a little management. Also, remember the saying ‘invest in real estate and wait, don’t wait to invest in real estate’. I’m really not a fan of flipping, wholesaling and all the other quick turn stuff that’s out there. Sure, sometimes you find a deal that’s better to do a flip, but there’s a lot of good reasons to hold for the medium-long term.

There’s also some great tax breaks for buy and hold real estate.

* Make sure you check with your Lawyer/Realtor to make sure that you’re protected incase you can’t close on the deal. “Subject to financing acceptable to the buyer” is a wonderful phrase….

4. Repeat

Don’t forget this part. There’s a killer adrenaline high after you buy a property. Remember that once you get your new baby tucked into bed, it’s back out to start working on buying your next piece of real estate.

Hey Chris,
Good post – very informative about the first two steps: finding a system (and sticking to it) and researching your market.
I would also suggest that one has to really understand “why” they want to invest in real estate. This is one of the biggest elements that differentiate great RE investors from average or ones that quit.

People who approach Julie (my wife and partner) and I and say “I want to invest in real estate” are always asked the question: “well, why do you want to invest in real estate?” If the answer is simply “to make millions”, I usually then ask, “well, why do you want to make millions?” And, unless they have a real strong answer for that, I generally feel that they haven’t set their goals to determine just “how” real estate can help them achieve their personal Belize….to borrow a line from Mr. D. Campbell. 🙂

Thanks Dave, I’m in complete agreement with you and Don. I have a cousin who used to have the million-dollar goal, and he’s since come around to more grounded goals (but no less lofty). The tangible items make it so much easier to focus on the target.

Excellent post. I could not agree with you more on many of the points that you highlighted.

One of your points, I found very powerful. You stated, “Do not become the serial seminar grad.”

This is very important advice that people should not underestimate. Often times people go from seminar to seminar looking for the magic bullet. They are looking for some sort of vehicle which will lead them to riches. Unfortunately, I see this time and time again with many people. They don’t implement what they learn at a seminar, and as a result, they just attend the next seminar hoping that they will learn something even better, that will enable them to make even MORE money.

The secret here is action. You have to take massive action once you have learned a system. There is no better avenue to create wealth with than through real estate. Like Chris says, once you buy, you have to wait.

For those looking to generate some more monthly cash flow off of their real estate investment, you can consider a Rent to Own strategy as well. I am a fan of the buy and hold, and the rent to own strategy.

I agree with you, but I’m not really a fan of Rent to Own. In particular I’m always skeptical of how many transactions actually close at the end and I think that for new investors they’re a more complex transaction than a simple buy and hold. Wouldn’t it make more sense to help people get moving with a simple one and then dive into more complex transactions?